By TIOL News Service

MUMBAI, FEB 21, 2015: THE appellants entered into an agreement with M/s. Universal Medicaments Private Ltd., for sale of ongoing concerns along with all the assets and liabilities. The said agreement was entered in 1988-89; consideration for such sale of transfer of business to M/s. Universal Medicaments Pvt. Ltd was lump sum consideration as well as the amounts to be paid as royalty. Consequent to such transaction, the Revenue authorities were of the view that the said amounts received by the appellants are taxable under "scientific or technical consultancy service".

The lower authorities confirmed the demand of tax &penalties and, therefore, the appellant is before the CESTAT.

It is submitted that the agreements clearly indicated that the entire production facilities including the product formulaes, technical staff, production and storage facilities, quality control set up, product techniques and process know-how etc for the manufacture of pharmaceutical goods have been sold to Universal Medicaments Pvt. Ltd. ; that the entire transaction is of sale and purchase of ongoing facility and such transaction cannot be covered under ‘Scientific and technical consultancy' services. Reliance is placed on the decisions in Modi-Mundipharma Pvt. Ltd. vs. CCE, Meerut - 2009-TIOL-968-CESTAT-DEL Hitachi Home and Life solutions (I) Ltd. - 2014-TIOL-368-CESTAT-AHM.

The AR justified the demand by reiterating the findings of the lower authorities.

The Bench observed that the contention of the Revenue that transaction involved in these appeals would be taxable under the category of "scientific and technical consultancy" needs to be rejected at the out set.

Adverting to the definition of scientific or technical consultancy, the CESTAT added that for services to get covered under the said definition, there has to be a scientific or technical institution or organisation and they should have rendered the services in one or more disciplines of science or technology as an institution; or scientists or technocrats, it is on record that the appellants herein are manufacturers of pharmaceutical goods and had their own set up, which they have sold to Universal Medicaments Pvt. Ltd.

Noting that the judgement of the Tribunal in the case of Modi-Mundipharma Pvt. Ltd. (supra) squarely covers the issue in favour and the fact that the appellants being manufacturers are not rendering any advice or consultancy, the orders were set aside and the appeals were allowed with consequential relief.

(See 2015-TIOL-373-CESTAT-MUM)